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How has HYG gone years without paying a capital gains dividend, whereas JNK has paid several? I know avoiding capital gains dividends is good because it reduces the need to pay capital gains taxes, but what are the mechanics for HYG doing this?

  • I would change the wording to "capital gains distribution" instead of dividend. I latched on to the word dividend not realizing that you were asking about capital gains. There is no such thing as a "capital gain dividend". – D Stanley Oct 6 '17 at 13:25
  • It's possible that they aren't selling any assets and thus aren't generating any capital gains. That would take a more thorough analysis of their holdings, though. – D Stanley Oct 6 '17 at 13:26
  • Right, but how does that actually work? For example, if HYG needs to sell a bond that no longer meets its requirements, what is it actually doing to get rid of it without actually selling it? – trade_the_basis Oct 6 '17 at 13:54
  • Do you know that it does? Maybe it just holds all bonds to maturity? I don't know one way or the other and can't tell from their prospectus. If it did sell assets and had a capital gain, it would be required to distribute at least part of it. If it sells assets for a loss, there would be no gain to distribute. – D Stanley Oct 6 '17 at 13:59
  • Oh, I see, maybe they just hold the bonds to maturity... – trade_the_basis Oct 6 '17 at 14:05

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